As the Colorado Oil and Gas Conservation Commission (COGCC) weighs competing demands of protecting the state finances and protecting industry returns, it will consider how regulatory changes will impact operators.  So, it should come as no surprise that parts of the oil and gas industry would seek to portray themselves as small-time, mom-and-pop operations, hustling to make a buck.

Take a recent submission from Colorado’s Small Operator Society (SOS).   SOS claims to represent over 10,000 wells and that its 58 members[1] consist “primarily of family owned/operated businesses,” whereby “[a] typical SOS member operates less than 100 wells each with marginal economics (i.e., an average net monthly cash flow of approximately $500.00).”[2]

At $500/month of cash flow, you might have some sympathy for the distress call coming from SOS.  We’ll come back to that below.

For now, the key point is that the S.O.S. call isn’t coming from ma and pa, it’s coming from some of the largest oil and gas operators in the state, per COGCC data:

  • The average SOS member owns 187 unplugged wells.
  • Six of those 58 members are in the top 20 for number of unplugged oil and gas wells in Colorado.[3]
  • Of the ~10,000 wells the SOS represents, 91% are owned by 12 companies that own 100 wells or more.
  • Two of the SOS members have recently merged with Terra Energy Partners Rocky Mountain LLC.  This mega-small operator controls 7,018 unplugged wells in the state and boasts a plugged-to-drilled ratio of 1.83% (Chevron’s is 37.5%, Occidental’s is 40.6%).

The COGCC data makes clear that the distress call from SOS is emanating from relatively large corporations—the same ones that dominate the Colorado oil and gas Industry.  Indeed, the relative size and ownership structure of the SOS members is representative of the Colorado oil and gas industry as a whole—more than 92% of the unplugged wells in the state are owned by operators with more than 100 wells (in red):

Total Unplugged Wells Operated > 2,000 Wells > 1,000 Wells > 500 Wells > 300 Wells >200 Wells > 100 Wells < 100 Wells
Number of Operators 1 4 6 6 6 12 42
Percent of Total SOS Unplugged Wells 21% 66% 81% 81% 81% 91% 9%
Total SOS Unplugged Wells in Category 2263 6980 8550 8550 8550 9575 1005


Total Unplugged Wells Operated > 2,000 Wells > 1,000 Wells > 500 Wells > 300 Wells >200 Wells > 100 Wells < 100 Wells
Number of Operators 6 14 21 26 29 47 381
Percent of Total Operators Unplugged Wells 49% 72% 81% 85% 86% 92% 8%
Total Operator Unplugged Wells in Category 25088 36404 41179 43195 43873 46685 4095

But what about the SOS’s archetypal small operator with cash flows of $500/month?  The number is surprisingly low even for an operator of a single, producing well.  Consider: at $30/bbl oil price, a well that produces 1bbl/d has revenues of $900 a month—nearly double the $500/ month the SOS cites!  So, how can they afford a bill that is certain to run into the tens, and possibly hundreds of thousands of dollars per well?

Such operators likely present the most immediate risk of not complying with plugging obligations, particularly where bonds do not cover the costs of plugging.  Whatever these stripper wells used to earn, those days are long gone, as are the revenues, leaving nothing set aside for the inevitable plugging.  Moreover, there’s the well-known risk of well-financed operators transferring wells to those with inferior credit, but very little in Colorado’s regulatory regime to stop that.

But the point of SOS’s filing is to ask, how can small operators afford any additional bonds? We need to turn this question on its head:  why should an operator with revenues that likely cannot cover plugging obligations be allowed to privatize those revenues, but then socialize the closure costs?  Why wasn’t money set aside in better days, when revenues were presumably higher than now?

If plugging costs are unaffordable today, they will be more unaffordable when it’s time to plug, leaving the state and taxpayers to pick up the bill.  It is a certainty that these wells will eventually need to be plugged, it is unclear whether there will be cash then to plug them.  Ignoring the problem will not make it go away.

Smaller operators put up an average of $23,957 per well in collateral and bonds, whilst the largest operators have much lower levels of coverage at $1,573 per well.[4]   While the smaller companies may pose a greater default risk, they are also carrying more financial assurance and are sitting that much closer to full single-well bonds.  Maybe that’s why the bigger operators that comprise the Small Operator Society are so concerned.


[1] Only 54 members are listed here; this list serves as the basis for our analysis:

[2] Small Operator Society, In the Matter of the Oil and Gas Conservation Commission of the State of Colorado Soliciting Information Regarding Financial Assurance, Cause No. IR, Dkt No. 210200013 (Mar. 15, 2021).

[3] Evergreen Natural Resources LLC (6th largest, 2,263 unplugged wells); Own Resources Operating LLC (7th largest, 1,814 unplugged wells); Foundation Energy Management LLC (8th largest, 1,682 unplugged wells); KP Kauffman Co., Inc. (13th largest, 1,221 unplugged wells); Grizzly Operating LLC (15th largest, 946 unplugged wells); and Ursa Operating Co., LLC (17th largest, 624 unplugged wells).

[4] Based on COGCC data, available at:


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